The Post-Democratic FutureBegins inChina EricX Li I n November 2012, the Chinese Communist Party (ccr) held its 18th National Congress, setting in motion a once-in-a-decade transfer of power toanewgeneration of leaders. Asexpected, Xi ]inping took over asgeneral secretary and will become the president of thePeople's Republic this March. The turnover wasasmooth and well-orchestrated demonstration by aconfidently rising superpower. That didn't stop international media and even some Chinese intel- lectuals, however, fromportraying it asamoment of crisis. Inanissue that waspublished beforethebeginning of thecongress, for example, The Economist quoted unnamed scholars at arecent conference as saying that China is "unstable at the grass roots, dejected at the middle strataand out of control at thetop." Tobesure, months before thehandover, thescandal surrounding BoXilai, theformer party boss of the Chongqing municipality, had shattered the ccr's long-held facadeof unity, whichhadunderwritten domestic political stability since theTiananmen Squareupheavals in1989.Tomakematters worse, the Chinese economy, which had sustained double-digit GDP growth for two decades, slowed, decelerating for seven straight quarters. China's economic model of rapid industrialization, labor-intensive manufacturing, large-scalegovernment investments ininfrastructure, and export growth seemed to have nearly run its course. Some in China and theWest havegonesofar astopredict the demise of the one-party state, which they allegecannot surviveif leading politicians stop delivering economic miracles. Such pessimism, however, is misplaced. There is no doubt that daunting challenges await Xi. But those who suggest that the cCP ERICX. LI isaventure capitalist andpolitical scientist inShanghai. 34 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party will not be able to deal with them fundamentally misread China's politics and theresilienceof itsgoverning institutions. Beijingwill be ableto meet thecountry's illswith dynamism and resilience, thanks tothe ccr's adaptability, system of meritocracy, and legitimacy with the Chinese people. In the next decade, China will continue to rise, not fade. The country's leaders will consolidate theone-party model and, intheprocess, challenge theWest's conventional wisdom about political development and the inevitable march toward electoral democracy. In the capital of the Middle Kingdom, theworld might witness thebirth of apost-democratic future. ON-THE-JOB LEARNING The assertion that one-party rule is inherently incapable of self- correction does not reflect the historical record. During its 63years in power, the cCP has shown extraordinary adaptability. Since its founding in1949,thePeople's Republic haspursued abroad rangeof economic policies. First, thecCP initiated radical land collectivization intheearly 1950s. This wasfollowed by thepoliciesof theGreat Leap Forward inthelate1950sand theCultural Revolution inthelate1960s to mid-1970s. After them camethe quasi-privatization of farmland intheearly 1960s, Deng Xiaoping's market reforms inthelate1970s, and J iang Zernin's opening up of the cor's membership to private businesspeople in the 1990s. The underlying goal has always been economic health, and when apolicy did not work-for example, the disastrous Great Leap Forward and Cultural Revolution-China was able to find something that did: for example, Deng's reforms, which catapulted the Chinese economy into the position of second largest intheworld. On theinstitutional front aswell, theccr hasnot shied awayfrom reform. One example is the introduction in the 1980sand 1990sof term limits for most political positions (and even of age limits, of 68-70, for the party's most senior leadership). Before this, political leaders had been abletousetheir positions toaccumulate power and perpetuate their rules. MaoZedong wasacaseinpoint. Hehad ended thecivil wars that had plagued China and repelled foreign invasions tobecome thefather of modern China. Yethisprolonged ruleled to disastrous mistakes, such astheCultural Revolution. Now, it isnearly impossible for the few at the top to consolidate long-term power. Upward mobility within theparty hasalsoincreased. January/February 2013 35 Return to Table of Contents Eric X. Li Intermsof foreignpolicy,Chinahasalsochanged coursemany times to achieve national greatness. It moved from aclose alliance with Moscowinthe1950stoavirtual alliancewith theUnited States inthe 1970sand 1980sasit sought to contain the Soviet Union. Today, its pursuit of amore independent foreign policy has once more put it at oddswith theUnited States. But initsongoing quest for greatness, China isseeking todefy recent historical precedents and risepeace- fully, avoiding themilitarism that plagued Germany andJ apan inthe first half of the last century. AsChinaundergoes itsten-year transition, callsathomeand abroad for another round of political reform have increased. One radical camp in China and abroad is urging the party to allow multiparty elections or atleast accept formal intraparty factions. Inthisview, only full-scaleadversarial politics canensurethat China getstheleadership it needs. However sincere, thesedemands all missabasicfact: thecCP hasarguablybeenoneof themost self-reforming political organizations inrecent world history. There isnodoubt that China'snewleadersface adifferent world than HuJ intao did when hetook over in2002, but chancesaregoodthat Xi'sccswill beabletoadapt toandmeetwhatever newchallenges therapidly changing domestic and international envi- ronments pose. Inpart, that isbecausetheccr isheavily meritocratic and promotes thosewith proven experience and capabilities. MAKING THE GRADE China watchers in the West have used reports of corruption- compounded by sensational political scandals such as the Bo Xilai affair-to portray theruling party asincurably diseased. The disease exists, tobesure, but themost important treatment istheparty itself. As counterintuitive asit might seemto Westerners, the ccr, whose political preeminence isenshrined intheChinese constitution, isone of themost meritocratic political institutions intheworld. Of the25members that madeup thepre-18th-Congress Politburo, thehighest rulingbody of theCCP, only five(theso-called princelings) came from privileged backgrounds. The other 20, including the president, Hu, and the premier, WenJ iabao, camefrom middle- or lower-classbackgrounds. Intheccr-'s larger Central Committee, which wasmadeup of morethan 300 people, thepercentage of peopleborn into wealth and power waseven smaller. The vast majority of those ingovernment worked and competed their way through theranks to 36 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party Chinese democracy: voting in Guangdong Province, China, March 3, 2012 the top. Admittedly, the new general secretary, Xi, is the son of a previous party leader. However, anoverwhelming number of those who moved up the ranks this past fall had humbler beginnings. Sohowdoes China ensure meritocracy? At theheart of the story is apowerful institution that is seldom studied in the West, the Organization Department of theccr. This department carries out an elaborateprocess of bureaucratic selection, evaluation, and promotion that would bethe envy of any corporation. Patronage continues to play arole, but by and large, merit determines whowill risethrough the ranks. Every year, thegovernment and itsaffiliated organizations recruit university graduates into entry-level positions in one of the three state-controlled systems: the civil service, state-owned enterprises, and government -affiliated social organizations such asuniversities or community programs. Most new recruits enter at the lowest level, or ke yuan. After afewyears, the Organization Department reviews their performance and canpromote themupthrough four increasingly elitemanagerial ranks:fu ke, ke,fu chu, andchu. Therangeof positions attheselevelsiswide, coveringanything fromrunning thehealth-care January/February 2013 37 Return to Table of Contents Eric X. Li systeminapoor villagetoattracting commercial investment inacity district. Once ayear, the Organization Department reviews quanti- tative performance records for each official ineach of these grades; carriesout interviews with superiors, peers, andsubordinates; andvets personal conduct. Extensive and frequent public opinion surveys are alsoconducted onquestionsrangingfromsatisfactionwith thecountry's general direction toopinions about moremundane and specific local policies. Oncethedepartment hasgathered acomplete dossier onall thecandidates, and hasconfirmed thepublic's general satisfaction or dissatisfaction with their performances, committees discuss the data and promote winners. After this stage, public employees' paths diverge, and individuals canberotated through and out of all three tracks (the civil service, state-owned enterprises, and social organizations). An official might start out working oneconomic policy and then movetoajob dealing with political or social issues. He or shecould gofromatraditional government position toamanagerial roleinastate-owned enterprise -+' or auniversity. Inmany cases, theOrganization Department will also -........ send alargenumber of promising officialsabroadtolearnbest practices around theworld. Thelikesof Harvard University's Kennedy School of Government and the National University of Singapore regularly host Chinese officialsintheir training programs. Over time, themost successful workers arepromoted again, towhat areknownasthefu ju andju levels, atwhichpoint atypical assignment isto manage districts with populations inthe millions or companies with hundreds of millions of dollarsinrevenues. Toget asenseof how rigorous theselection process is, in2012, therewere900,000 officials at thefu ke and ke levels and 600,000 at thefu chu and chu levels. There wereonly 40,000 at thefu ju andju levels. After theju level, avery talented fewmoveup several moreranks and eventually makeit totheparty's Central Committee. The entire process could taketwotothree decades, and most of thosewhomake it tothetop havehad managerial experience injust about every sector of Chinese society. Indeed, of the25 Politburo members before the 18thParty Congress, 19had runprovinces larger than most countries intheworld andministrieswithbudgets higher thanthat of theaverage nation's government. A person with Barack Obama's pre-presidential professional experiencewouldnot evenbethemanager of asmall county inChina's system. 38 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party Xi's career path is illustrative. Over the course of 30 years, Xi rose from being afu ke level deputy county chief in apoor village to party secretary of Shanghai and amember of the Politburo. By the time hemade it to the top, Xi had already managed areas with total populations of over 150 million and combined GDPS of more than $1.5 trillion. His career demonstrates that meritocracy drives Chinese politics and that those who end up leading the country haveproven records. INNOVATE OR STAGNATE China'scentralized meritocracy alsofostersgovernment entrepreneur- ship. The practice of conducting top-down policy experiments in select locales and expanding the successful ones nationwide iswell documented. The best-known example isDeng's creation of "special economiczones" inthe1980s.ThefirstsuchzonewasinShenzhen. The district wasencouraged tooperateunder market principles rather than the dictates of central planners. Shenzhen's economy grew rapidly, which prompted thecentral government to replicate theprogram in the cities of Zhuhai and Shantou, inGuangdong Province; Xiamen, inFujian Province; and throughout Hainan Province. There arealsothousands of policy experiments that riseup from thelocal level. The competitive government jobmarket givescapable local officials incentives to take risks and differentiate themselves fromthepack. Among the2,326 party representatives who attended the 18thParty Congress, onesuch standout wasQiu He, who isvice party secretary ofYunnan Province. Atthecongress, Qiuwasselectedas analternate member of theCentral Committee, putting the55-year- oldmaverick near thetop of thenation'spolitical establishment. Qiuis theultimate political entrepreneur. Borninto poverty inrural China, Qiu watched two of his eight siblings die of childhood illness and malnutrition. After taking thenational collegeentrance exam, China's great equalizer, hewas able to attend university. When he entered the work force, he held several low-level civil service jobs before being appointed party secretary of Shuyang County, in northern J iangsu Province, inthe1990s. With apeasant population of 1.7mil- lion and anannual per capita GDP of only $250 (less than one-fifth the national average), Shuyang wasoneof thepoorest rural areas in thecountry. The county alsosuffered fromtheworst crimerateinthe region and endemic government corruption. January/February 2013 39 Return to Table of Contents Eric X. Li Qiu carried out abroad range of risky and controversial policy experiments that, if they failed, would havesunk hispolitical career. His first focus was Shuyang's floundering economy. In 1997, Qiu initiated amandatory municipal bond purchase program. The policy required every county resident topurchasebondstofund much-needed infrastructure development. Thegeniusof theplanwastwofold. First, he could not have raised the funds through taxesbecause, at hislevel, he had no taxation authority. Second, themandatory bond programoffered the citizens of Shuyang something taxeswould not have: yes, they were required to buy the bonds, but they eventually got their money back, with interest. Qiu alsoassigned quotas to almost every county government official for attracting commercial investments. Tosupport their efforts, inadditiontobuildingupthearea'sinfrastructure, Qiuofferedfavorable tax rates and cheap land concessions tobusinesses. Injust afewyears, thousands of privateenterprises sprangupandtransformed adormant, centrally planned rural community into avibrant market economy. Qiu'ssecond focuswascombating corruption and mistrust between thepopulation and thegovernment. Inthe late 1990s, heinstituted twounprecedented measures tomaketheselection of officialsmore openandcompetitive. Onewastopost upcoming official appointments inadvanceof thefinal decisions toallowfor apublic comment period. Theother wastheintroduction of atwo-tier voting systemthat enabled villagers tovote among party members for their preferred candidates for certain positions. The local party committee then picked between thetop twovotegetters. Qiuinitially met tremendous resistance fromthelocal bureaucracy and population. But today, he is credited with turning one of the country's most backward regions into a vibrant urban center of commerceand manufacturing. Other poor regions haveadopted many of hiseconomic policy experiments. Moreover, thepublic commenting period hasbeenwidely adopted acrossChina. Competitive voting is finding its way into ever-higher levels of the party hierarchy. Qiu has been personally rewarded, too, moving rapidly up the ladder: to vicegovernor of J iangsu Province, mayor of Kunmin, viceparty The CCP's role in saving China from outsiders is a far more durable source of its legitimacy than the , . country seconomic performance. 40 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party secretary of Yunnan Province, and now analternate member of the Central Committee. BY POPULAR DEMAND Even if critics accept that the Chinese government isadaptable and meritocratic, they still question its legitimacy. Westerners assume that multiparty elections arethe only source of political legitimacy. Because China does not hold such elections, they argue, the cce's rule rests on inherently shaky ground. Following this logic, critics havepredicted the party's collapse for decades, but no collapse has come. The most recent version of the argument isthat the cCP has maintained its hold onpower only becauseit hasdelivered economic growth-so-called performance legitimacy. Nodoubt, performance isamajor sourceof theparty's popularity. Inapoll of Chinese attitudes published by thePewResearch Center in2011,87 percent of respondents noted satisfaction with thegeneral direction of the country, 66percent reported significant progress in their livesinthepast fiveyears, and awhopping 74percent said they expected the future tobeevenbetter. Performance legitimacy, how- ever, isonly onesource of the party's popular support. Much more significant isthe roleof Chinese nationalism and moral legitimacy. When the ccr built theMonument to thePeople's Heroes at the center of Tiananmen Square in 1949, it included afrieze depicting thestruggles of the Chinese to establish the People's Republic. One would expect the ccr, a Marxist-Leninist party, to have its most symbolic political narrative begin with communism-the writing of The Communist Manifesto, for example, or perhaps thebirth of theccr in1921. Instead, thefirst carving of thefrieze depicts anevent from 1839: the public burning of imported opium by the Qing dynasty's imperial minister, Lin Zexu, which triggered the first Opium War. China'ssubsequent losstotheBritish inaugurated theso-calledcentury of humiliation. Inthefollowinghundred years, Chinasufferedcountless invasions, wars, and famines-all, in the popular telling, to reach 1949. And today, the Monument to the People's Heroes remains a sacred public siteand themost significant symbol of theccr's national moral authority. The ccr's role in saving and modernizing China is afar more durable source of its legitimacy than thecountry's economic perfor- mance. It explains why, evenat theworst times of theparty's rulein January/February 2013 41 Return to Table of Contents Eric X. Li thepast 63years, including the disastrous Great Leap Forward and Cultural Revolution, the ccr was abletokeep thesupport of main- stream Chinese long enough for it to correct its mistakes. China's recent achievements, fromeconomic growth tospaceexploration, are only strengthening nationalist sentiments inthe country, especially among theyouth. The party cancount ontheir support for decades to come. A final typeof staying power comesfromrepression, which China watchers in the West claimis the real force behind the cCP. They point to censorship and the regime's harsh treatment of dissidents, which undoubtedly exist. Still, theparty knowsvery well that general repression is not sustainable. Instead, it seeks to employ smart containment. The strategy istogivethevast majority of people the widest rangepossibleof personal liberties. And today, Chinese people arefreer than at any other period inrecent memory; most of them canlivewhere they want and work asthey choose, go into business without hindrance, travel within and out of the country, and openly criticizethegovernment onlinewithout retaliation. Meanwhile, state power focuses oncontaining asmall number of individuals whohave political agendas and want to topple the one-party system. As any casual observer would know, over the last ten years, the quantity of criticism against the government online and in print has increased exponentially-without any reprisals. Every year, there are tens of thousands of local protests against specific policies. Most of the disputes areresolved peacefully. But thegovernment dealsforcefully with thevery fewwho aimto subvert China's political system, such asLiu Xiaobo, anactivist who callsfor the end of single-party rule and who iscurrently injail. That isnot tosay that there aren't problems. Corruption, for one, could seriously harmtheccv's reputation. But itwill not derail party ruleanytimesoon. Far frombeing aproblem inherent totheChinese political system, corruption is largely abyproduct of the country's rapid transformation. When theUnited States wasgoing through its industrialization 150yearsago,violence, thewealth gap, andcorruption inthe country werejust asbad as, if not worsethan, inChina today. According toTransparency International, China ranks 75th inglobal corruption and is gradually getting better. It is less corrupt than Greece (80th), India (95th), Indonesia and Argentina (tied at lOOth), and the Philippines (129th)-all of which areelectoral democracies. 42 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party Understood insuch acontext, the Chinese government's corruption isby nomeans insurmountable. And theparty's deeply rooted popu- lar support will allowit thebreathing roomtograpple with eventhe toughest problems. ENTER THE DRAGON China's new leaders will govern the country for the next ten years, during which they will rely on the ccr's adaptability, meritocracy, and legitimacy to tackle major challenges. The current economic slowdown isworrying, but it is largely cyclical, not structural. Two forces will reinvigorate theeconomy for at least another generation: urbanization and entrepreneurship. In 1990, only about 25 percent of Chinese lived incities. Today, 51percent do. Before 2040, afull 75 percent-nearly one billion people-are expected to be urban. The amount of new roads, housing, utilities, and communications infrastructure needed to accommodate this expansion isastounding. Therefore, any apparent infrastructure or housing bubbles will be momentary. In fact, China's new leadership will need tocontinue or even increase investment inthese sectors intheyears tocome. That investment and thevast newurban work force, with all itsproduction and consumption, will drivehigh economic growth rates. The party's extraordinary ability to develop and execute policy and its political authority will help it manage theseprocesses. Meanwhile, entrepreneurship will help China overcome threats to its export-fueled economic model. Externally, the global economic downturn and arising currency valuehavedampened Chinese trade. Internally, laborcostshaveriseninthecountry's coastal manufacturing regions. But themarket will sort out theseproblems. After all, China's economic miracle was not just a centrally planned phenomenon. Beijing facilitated the development of apowerful market economy, but private entrepreneurs arethelifeblood of thesystem. And these entrepreneurs arehighly adaptive. Already, somelow-end manufac- turing has moved inland to contain labor costs. This is coinciding with local governments' aggressive infrastructure investments and innovative efforts toattract newbusiness. Inthecostal regions, many companies areproducing increasingly-higher-value goods. Of course, the government will need to make some economic adjustments. For one, many state-owned enterprises havegrown too big, crowding out theprivate-sector growth that iscritical toeconomic January/February 2013 43 Return to Table of Contents vitality. Plans to require companies to payout dividends to share- holders and other limits onexpansion arealready intheworks. These will likely beimplemented early oninthe new administration. And some stalled measures encouraging financial liberalization, such as allowing the market to determine interest rates and the develop- ment of private small and medium-sized lending institutions, which wouldbreak thelargestate-owned banks' near monopoly incommercial lending, arelikely to get picked up. These reforms would facilitate more efficient flowsof capital tobusinesses. Economic liberalization will likely be matched by a two-track reform of social policy. First, the process of making theparty more inclusive, which began with J iang's inclusion of businesspeople in the CCP, will be accelerated. Second, the ccr will begin experimenting withoutsourcingcertainsocialwelfare functions to approved nongovern- mental organizations. Rapid urban- ization isfacilitating thegrowth of a successful alternatives exist. largemiddle-income society. Instead of demanding abstractpolitical rights, asmany inthe West expected, urban Chinese arefocused onwhat are called min sheng (livelihood) issues. The party may not be able to manage these concerns alone. And soprivate businesses or non- governmental organizations might be called in to provide health careand education inthecities, which hasalready started tohappen inGuangdong Province. Corruption remains thehardest nut tocrack. Inrecent years, family members of someparty leaders haveused their political influence to build uplargenetworks of commercial interests. Cronyismisspreading fromthetop down, which could eventually threaten theparty's rule. Theccr- hasarticulated athree-pronged strategy toattack theproblem, whichthenewleadership will carryout. Themost important institution for containing corruption isthe ccr's Central Commission for Dis- ciplineInspection. Its leader usually sitsontheStanding Committee of the Politburo and has more power than the state judiciary. This person candetain and interrogate party members suspected of corrup- tionwithout legal limits. Inrecent years, thecommissionhasbeenvery aggressive. In 2011, it conducted formal investigations into 137,859 Eric X. Li The significance of China's success is not that China provides the world with an alternative model but that it demonstrates that 44 FOREIGN AFFAIRS Return to Table of Contents The Life of the Party casesthat resulted indisciplinary actions or legal convictions against party officials.This number represents anearly fourfold increasesince the years before 1989, when corruption was one of the main issues that drove the Tiananmen protests. One sign to watch in the next administration iswhether thecommission isauthorized toinvestigate wrongdoing within theinner sanctum of theparty leadership, where corruption canbethe most detrimental totheparty's credibility. Complementing theparty's ownantigraft efforts isthe increasing independence of mediaoutlets, both state- andprivately owned. News organizations have already exposed cases of official corruption and disseminated their findings onthe Internet. The ccr hasresponded by pursuing someof the casesthat the media havebrought to light. Of course, this system is not perfect, and some media outlets are themselves corrupt. Illicit payments to journalists and fabricated stories arecommonplace. If theseproblems arenot corrected quickly, Chinese mediawill losewhat little credibility they havegained. Accordingly, the next administration might develop moresophis- ticated political regulations and legal constraints onjournalists to providespaceforthesector tomature. Officialshavealready discussed instituting apress lawthat would protect legitimate, factual reporting and penalize acts of libel and misrepresentation. Some might view theinitiative asthegovernment reining injournalists, but thelarger impact would betomakethe media more credible inthe eyesof the Chinese public. J ournalists whotakebribes or invent rumors toattract readers canhardly check government corruption. Alsototacklecorruption, theparty plans toincrease open compe- tition within itsownranks, inspired by theefforts of officialssuch as Qiu. The hope is that such competition will air dirty laundry and discourage unseemly behavior. The Hu administration initiated an "intraparty democracy" program to facilitate direct competition for seats onparty committees, anidea that received high praise at the 18th Congress. HISTORY'S RESTART Should the18th Party Congress' initiatives succeed, 2012might one day beseen asmarking theend of the ideathat electoral democracy is the only legitimate and effective system of political governance. While China's might grows, theWest's ills multiply: sincewinning the Cold War, the United States has, inone generation, allowed its January/February 2013 45 Return to Table of Contents Eric X. Li middle classtodisintegrate. Itsinfrastructure languishes indisrepair, and its politics, both electoral and legislative, havefallen captive to money and special interests. Its future generations will besoheavily indebted that asustained declineinaverageliving standards isall but certain. In Europe, too, monumental political, economic, and social distress hascaused theEuropean project torunaground. Meanwhile, during the same period, China has lifted hundreds of millions of people out of poverty and isnowaleading industrial powerhouse. The West's woes areself-inflicted. Claims that Western electoral systems are infallible have hampered self-correction. Elections are seen asends in themselves, not merely means to good governance. Instead of producing capableleaders, electoral politics havemade it very difficult for good leaders to gain power. And in the few cases when they do, they are paralyzed by their own political and legal systems. As D.S. Secretary of State Hillary Clinton travels around theworld extolling electoral democracy, the legitimacy of nearly all D.S. political institutions is crumbling. The approval rating of the D.S. Congress among the American people stood at 18percent in November. Thepresident wasperforming somewhat better, with ratings inthe50s. And evensupport for thepolitically independent Supreme Court had fallen below 50percent. Many developing countries havealready cometolearnthat democ- racy doesn't solveall their problems. For them, China's example is important. Itsrecent successand thefailures of theWest offer astark contrast. Tobesure, China's political model will never supplant elec- toral democracy because, unlike the latter, it does not pretend to beuniversal. It cannot beexported. But its success does show that many systems of political governance can work when they are congruent with acountry's culture and history. The significance of China's success, then, is not that China provides the world with an alternative but that it demonstrates that successful alternatives exist. Twenty-four years ago, thepolitical scientist Francis Fukuyama predicted that all countries would eventually adopt liberal democracy and lamented that theworld would become aboring placebecause of that. Relief isontheway. A more interesting agemay beupon us.~ 46 FOREIGN AFFAIRS
Australian Government - Available and Affordable - Improvements in Liability Insurance Following Tort Law Reform in Australia - December 2006 (Appendix 12.06 To AAD Revised Proposal)